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The Determinants of Pharmaceutical Research and Development Investments

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  • Civan Abdulkadir

    (Fatih University, Turkey)

  • Maloney Michael T.

    (Clemson University)

Abstract

Our maintained hypothesis is that drug development responds to the intensity of consumer demand. We look at the distribution of drug development by disease and link this to the economic harm caused by disease as measured by mortality. Mortality data represent the net effect of human frailty and the efficacy of the existing drugs on the market. If people continue to die from a given condition then existing drugs are not perfect and there are potential profits from developing a more effective compound. We aggregate economic harm worldwide and into three broad regions: the United States, other developed countries, and underdeveloped countries. We find that economic harm motivates the distribution of drug development across diseases, but it is economic harm in the United States alone that matters.

Suggested Citation

  • Civan Abdulkadir & Maloney Michael T., 2006. "The Determinants of Pharmaceutical Research and Development Investments," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-38.
    • Handle: RePEc:bpj:bejeap:v:5:y:2006:i:1:p:38:n:1041
    DOI: 10.2202/1538-0645.1511
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    2. Blume-Kohout, Margaret E. & Sood, Neeraj, 2013. "Market size and innovation: Effects of Medicare Part D on pharmaceutical research and development," Journal of Public Economics, Elsevier, vol. 97(C), pages 327-336.
    3. Frank R. Lichtenberg, 2012. "Pharmaceutical Innovation and Longevity Growth in 30 Developing and High-income Countries, 2000-2009," NBER Working Papers 18235, National Bureau of Economic Research, Inc.
    4. Abdulkadir Civan & Michael Maloney, 2017. "Launch Decisions of Pharmaceutical Companies," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 1(1), pages 35-58.
    5. Civan Abdulkadir & Maloney Michael T., 2009. "The Effect of Price on Pharmaceutical R&D," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(1), pages 1-24, April.
    6. Barrenho, E & Smith, PC & Miraldo, M, 2013. "The determinants of attrition in drug development: a duration analysis," Working Papers 12204, Imperial College, London, Imperial College Business School.
    7. Lichtenberg Frank R., 2010. "Pharmaceutical Price Discrimination and Social Welfare," Capitalism and Society, De Gruyter, vol. 5(1), pages 1-32, July.
    8. Geng, Hao & Shi, Ce Matthew, 2024. "Health policy, price regulation, and innovation: Evidence from China’s vaccine industry," Journal of Development Economics, Elsevier, vol. 167(C).
    9. Gentilini, Arianna & Miraldo, Marisa, 2023. "The role of patient organisations in research and development: Evidence from rare diseases," Social Science & Medicine, Elsevier, vol. 338(C).
    10. Abdülkadi̇r Ci̇van & Bülent Köksal, 2010. "The effect of newer drugs on health spending: do they really increase the costs?," Health Economics, John Wiley & Sons, Ltd., vol. 19(5), pages 581-595, May.
    11. Zhang, Xuan & Nie, Huihua, 2021. "Public health insurance and pharmaceutical innovation: Evidence from China," Journal of Development Economics, Elsevier, vol. 148(C).

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